Realism With Affiliate Payouts - What Is 'Fair'

[Lee]

When it comes to sponsor programs, it seems like more and more of them are raising payouts for affiliates to attract a larger affiliate base as of late however, despite being paid more by these affiliate programs, the individuals signing up and promoting the sites these sponsors offer seem to constantly bitch about these programs using upsells inside the members areas and cross sells on the join form.

Now i think we pretty much all understand that in order for an affiliate program to continue offering raised/higher payouts, that program needs to make money so, why then, if a sponsor is offering $50 for a $2 trial, do affiliates constantly bitch and moan about upsells and cross sells?

Surely if affiliates cared so much about these practices they wouldnt be promoting the big PPS sponsor programs that were offering $50+ for a trial.

That being said, what do you think is a 'fair' payout in terms of what an affiliate should be paid for the sales they send to an affiliate programs paysite?

I mean there has to be a middle ground right, if a member joins for a $3 trial, how much do you think is fair for YOU to be paid for that join?

Regards,

Lee

[DrChango]

I've pondered this many, many times...

As an account rep for a sponsor, I think I'll keep my personal opinions to myself

[TedVon]

I'm relatively new, but isn't it basically a math problem? Or, at least, there is a large math component.

The amount of payout to affiliates <= amount it would cost to get the same amount of traffic yourself.

Meaning; if it is cheaper (both in time and expense) for a site to pay for advertising to get the same amount of traffic that is generated by affiliates; then they may want reevaluate how much they pay out.

In other words, if cross sells and upsells are needed to compensate for affiliate payouts then there might be something wrong with the financial model.

[Lee]

A lot of it is to do with math for example...

$3 join - $35 payout = -$32

$32 + $2 (processing costs) = $34

So for each sale an affiliate sends, the program is automatically (on the PPS business model) $34 in the hole.

Lets say that 60% of those initial trials actual go pass the trial period and rebill, out of 100 joins, the program makes $100 initially (after processing fees), but they then payout $3500, of which, they make $2100 back in trial to full rebills.

Now, based on the fact that 99% of all PPS programs paysites members areas quite frankly suck, of that initial 60% that go to full membership from the trial, maybe another 60% of them rebill in to month 2 making the program another $1080.

The program made from 100 trial joins, $100 + $2100 + $1080= $3280, the program is STILL $220 in the hole from that initial 100 trial joins, that is IF 60% of them actual go from trial to full, that number is going to be much lower than 60%.

Now, take in to account how much bandwidth these PPS programs burn through on FHGs, hosted free sites, hosted promo tools, all of which affiliates demand they have, that is not even looking at content costs (exclusive and leased feeds) for a PPS program to actually make money they need to offer things like upsells and cross sells.

For as long as affiliates keep wanting to be paid $35+ on a 2-3 day trial, cross sales and upsells will be a part of this business yet, affiliates apparently do not like them, putting the program in a catch 22 situation, affiliates either get paid $35 per trial join with upsells and cross sells, or the program goes out of business.

That is one of the reasons why ill more than likely stick to revshare based programs as a company, less hassles in terms of payouts and accounting plus, if an affiliate makes money, i make money so im going to do my best to ensure that the sites i put out sell, as a revshare program owner.

Take a look at the same 100 joins on the standard 50% revshare business model...

$29.95 join - 50% payout = $14.97

$14.97 - $2 processing = $12.97

So for every 100 joins sent to a revshare program, the owner initially makes $1297.00 no matter what.

That doesnt even take in to account rebills which are significantly higher on revshare programs sites because more effort is put in to the members area than on PPS programs sites where volume and turnover is the key business model.

Could a program owner use that money they pay their affiliates to build their own source of traffic? Sure they can, but at the same time, so long as they are offering trials, they are always going to be in the hole, more often than not, by offering $35 trials they actually get access to a much broaded range of traffic sources than if they were buying that traffic directly and, there is less 'loss' to them if that traffic doesnt convert.

For a PPS program to make money, the member HAS to rebill twice, thats why they offer upsells and cross sells on the join page, its typically easier to bill more than to put effort in to building a quality product, so that is what they do.

For a revshare program to make money, the member just has to join.

Regards,

Lee

[Squirt]

I don't agree with pre checked xsells , no matter what site is doing it. I feel they are unethical.

Regarding what's fair for affiliates to be paid - everything is negotiable and affiliates have been known to have different standards for different sites.

What we have learned over the years is that many programs who utilize pre checked xsells have been accused of shaving. It makes sense.. if they are willing to cheat a customer then they'll do it to affiliates

[StunnerJesse]

I think of it as a race to the bottom.

Just like what happened on Wall Street with mortgages.

The numbers are making less and less sense. It may go on successfully for awhile, but eventually, something has to change.

In the meantime, as an affiliate, if you're willing to pay it, I am willing to promote it.

I just don't know how it will continue on as sponsors continue to raise payouts.

Also, I am afraid all of the cross sales are going to burn out the customer. I have heard of so many horror stories about a shit ton of charges when somebody's intention was to sign up with a single site.

Sponsors may be digging their own grave. Or maybe not.

I have mixed feelings on it. If it's working, then I am all for it. My only fear is that it will eventually backfire to where nobody will sign up for paysites. I am not a sponsor and therefore do not have numbers to crunch.

I do understand the motivation -- everybody is going after the same pink dollar, which by the sounds of it, is becoming more and more elusive.

A few bad apples can spoil the bunch. I have seen some sponsors who are upfront with the cross sales (although they are pre-checked) and do not try to disguise it too much. Then there are the ones who use white text on white backgrounds.

[abostonboy]

Now, based on the fact that 99% of all PPS programs paysites members areas quite frankly suck, of that initial 60% that go to full membership from the trial, maybe another 60% of them rebill in to month 2 making the program another $1080.

. Have you ever seen the inside of *some* revshare sites? :p

[Lee]

I am afraid all of the cross sales are going to burn out the customer. I have heard of so many horror stories about a shit ton of charges when somebody's intention was to sign up with a single site.

Cross sales have already burnt out the customer, which is why their usage is now limited by several payment processors and also why Visa is starting to issue new regulations about cross sale usage, specifically what can and what cant be cross sold on join pages.

Regards,

Lee

[StunnerJesse]

On sponsors that only do rev share, I get leery...

If a sponsor can do PPS, it mean that they have great retention. Granted, a new sponsor may make a mistake of doing it and going into the hole quickly. Having said that, if a program has been around, with PPS and $1 trials for years, they are clearly making money. These same sites update with fresh and exclusive content once or twice a week, too. Many have members area message boards brimming with traffic and a lot of the members have joined months before.

So, if a site owner is saying "trust me, your sales will rebill," am I supposed to take their word for it? If they truly did rebill that much, it would make more sense for the site owner to do PPS -- lose on the front end, make even more money on the back end.

It's a numbers game that I really didn't sit down to until tonight. After lots of crunching and seeing how long some of these bigger sites doing this retain their members, it makes complete sense to me. It's cash flow intensive for sure, but we're talking huge operations throwing off a ton of cash...they can easily afford it.

These same sites that give me PPS also usually give me a login so I can see what all of the hype is about and they always deliver.

Many revshare programs are terrified of giving out logins though. What in the world are they hiding behind that paywall? Better yet, are they not hiding anything, which is what they are worried affiliates will figure out?

I don't buy the whole "piracy risk" argument. A well known and respected affiliate is not going to pirate shit and risk their reputation. The 18-year-old with Mommy and Daddy's credit card and a super fast college network is likely to do that. The whole "but you might promote content we don't want you to" argument doesn't really work, either ... as you can set up ground rules if your that concerned. I am not saying give any ol' affiliate access, but if they are a known affiliate, it can only help, not hurt a sponsor.

And then, what throws it all out the window is that the bigger sites that are confident when it comes to rebills, have no problem doling out a u/p. They WANT their affiliates to get psyched and sell their sites.

Now, I do not think giving out u/p is a workaround for not bothering with putting together great affiliate tools. I just think its a great way to supplement the affiliate relationship. For instance, with one popular site, I log in with each update and then post a lengthy post about how hot the update is -- I explain it in detail and then send the surfer off to a tour ... then they want more and buy. I know it works because I setup special campaigns to track each update (another reason NATS is so great -- it shows me exactly what sells).

So, why are some program owners so stingy all around? What does not giving out a u/p to a great affiliate achieve? Hell, I have paysite owners that I don't even promote giving me u/p's hoping that I do promote.

I just think it's shady when a sponsor says "trust us, we have great rebills" and then refuse to back it up. It just stinks.

I am signed up for a lot of sponsors. The ones I promote heaviest are the ones I am confident in. I got confident in them because they gave me access to their amazing site.

[Rich]

i like the revshare sponsors because i think the people joining the sites are not going to be ripped off using feeds and stuff that they will have seen everywhere else before

when i joined a site i would cancel right away if it had the same feeds as sites i have joined before that really turns me off seeing the same stuff again and again i think a lot of per signup sponsors fill the members areas with feeds and dont have any content of there own but it is all leasable stuff.